Study finds lack of healthy competition

Hawaii has the second-least competitive commercial health insurance market in the country, according to an American Medical Association study released this week.

Hawaii Medical Service Association, the state’s largest health insurance provider, better known as HMSA, has 69 percent of the commercial health insurance market and 84 percent of the preferred provider organization market, the report said. Nationwide, 89 percent of market share areas have at least one provider claiming more than 30 percent of the insurance market, while 9 percent of the market share areas have a provider claiming 70 percent or more of the market.

The lack of competition can lead to problems for patients, large employers and employee groups and doctors, AMA President Dr. Jeremy Lazarus said.

“Without competition, there may not be the impetus to get better innovation and efficiency,” Lazarus said Wednesday. “In general, when you have an insurer that has such a monopoly on the market, the physicians have to take it or leave it. There’s not a lot of room for negotiation.”

Lazarus also sees less motivation for insurance providers to create a better system for delivering medical services, he added.

But HMSA doesn’t think the limited number of insurance providers in the state is hurting residents at all, HMSA Vice President for Communication Elisa Yadao said.

“While the study makes ominous predictions about a lack of competition, that is not the case in Hawaii,” Yadao responded in an email. “We often perform better in key health areas than states on the mainland. We have a very low rate of uninsured residents and scored No. 1 overall in the Gallup Healthways Well-Being Index again this year.”

Yadao cited a 2011 study by The Commonwealth Fund and an Associated Press report that said Hawaii has “among the lowest average family premiums in the nation.”

HMSA combines those rates with “benefits that are often more extensive than mainland plans,” she added.

Talking about Hawaii’s current insurance rates seems like a “red herring,” Lazarus said.

“If you had competition, you could push the rates down (more),” he added.

The AMA study noted two recent attempts to consolidate health insurance companies were more closely scrutinized than similar mergers in the past. One in Pennsylvania, announced in 2007, was called off in 2009, because the state’s insurance department ordered one of the companies to drop its affiliation with Blue Cross Blue Shield. In 2010, the U.S. Department of Justice said it would file an antitrust lawsuit to prevent Blue Cross Blue Shield of Michigan from acquiring Physicians Health Plan of Mid-Michigan. That announced prompted Blue Cross Blue Shield of Michigan to call off the deal.

“Although those recent efforts at consolidation received more antitrust scrutiny than previous ones, most health insurance markets are nonetheless already highly concentrated,” the study said in its conclusion. “Thus, another line of research for regulators to pursue is to examine the impact of prior market consolidation on premiums. Such retrospective studies would complement the present methodology of predicting merger effects at the time of announcement and in turn help guide merger enforcement policy.”

Representatives of Kaiser Permanente were unavailable for comment Wednesday or Thursday.